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How parastatals are losing money

UIA headquarters at Namanve industrial park

A parliamentary committee has made startling revelations

A voluminous parliamentary report on the performance of public enterprises has found that the manner in which some of them are run is appalling, leading to losses amounting to billions of shillings annually.

An analysis of the report written by the Committee of Parliament on Commissions, Statutory Authorities, and State Enterprises (Cocase), found that the largest losses arise from sheer negligence, fraud and mismanagement. The report reviewed the financial years ending in June of 2011, 2012, and 2013.

It found that several public entities are grappling with management issues, gross procurement irregularities, and suspicious transactions involving millions. Some entities have been making losses for years, while others have not been paying taxes or remitting NSSF deductions on their employees, and yet others are grossly understaffed.

PERSONAL FIEFDOMS

The committee observed that some enterprises are run by individuals as though they were their personal fiefdoms. In such cases, bosses are not shy to employ their children and relatives. At Uganda Investment Authority (UIA) for instance, the executive director, Dr Frank Sebbowa, reportedly took over active supervision of interns from his juniors at some point and extended their stay at the workplace beyond what was stipulated.

Though interns at UIA are paid Shs 100,000 a month, Sebbowa reportedly ordered that they be paid Shs 300,000. Asked by the committee why he had accorded the interns special treatment, Sebbowa answered that as a “former lecturer, he was keen on interns.”

The committee found his conduct “strange,” according to their report. The report also noted that Mandela National stadium paid Shs 114.2m to undisclosed individuals as commission for getting business for the stadium but there were no receipts to show that the money had been received.

At the National Forestry Authority, Shs 19.6m was paid in cash to staff to install garden lights and repair transport units. NFA officials argued that the installations were minor and did not require procurement.

The committee actually found what it described as procurement irregularities in least 13 government entities, including National Planning Authority, New Vision, Dairy Development Authority (DDA), PPDA, Ubos, Uganda Land Commission, and Kilembe Mines Ltd.

Some entities, the report found, have failed to protect or secure their land titles. Others have the land housing their headquarters being claimed by some people. For instance, the report found that the title of NFA’s plots 4 and 5 in Bugolobi, where the body has its headquarters, was transferred by Uganda Land Commission to RARA Info Tech Ltd, a firm owned by one Rajan, a moneylender.

At least nine other entities were found to have no titles for their land or their leases secured. The report notes that in such cases, they are at risk of losing the land.

NO BOARDS

Some entities have operated without boards for more than three years, the committee noted. The board’s role in such cases has been usurped by either management or the line minister, who often abuse or overstep their mandate. To function effectively, public entities are required to have boards of directors, who, among other things, appoint the top management and oversee the overall running of the entities.

But as many as 27 government entities were found to operate without a board of directors or an internal audit function. Entities that have operated without a board for more than a year include National Drug Authority (NDA), Uganda Communications Commission (UCC), Joint Clinical Research Centre (JCRC), Uganda Industrial Research Institute, Uganda Coffee Development Authority (UCDA), Rural Communications Development Fund (RCDF), Uganda Broadcasting Corporation (UBC), UIA and National Animal Genetic Resource Centre & Data Bank (NAGRC & DB).

Others have boards but still the committee found irregularities in the way they work.  At UIA, the minister of state for Investment, Ajedra Aridru, disagreed with the management and technical team on who should be given land in the industrial park at Namanve and who should or shouldn’t pay the premium.

When the UIA executive allocated 10 acres to Picfare Industries Ltd and the firm instead surveyed 11.6 acres, the authority protested. But the minister directed that “Picfare should be left alone.” 

The minister also waived the premium payable by Picfare, yet the firm doesn’t fall in the waiver-qualifying categories of ICT, tourism and hospitality, mineral beneficiation, and agro-processing. 

Asked about his interest in Picfare, the minister told the committee that he had “Googled and found that processing stationery or paper was indeed agro-processing”. This, he said, was justification enough for Picfare to get a waiver.

On another occasion, the same minister directed that Bugembe Real Estate Developers be given land without paying a premium since the firm would use the land for agro-processing. The committee wondered how Bugembe, a real estate firm, had suddenly become an agro-processing enterprise.

“The minister took it upon himself to expand the definition of the word agro-processing to help the companies escape paying premium,” the report says. 

Bugembe received 3.6 hectares and, according to the report, it wants to parcel it and sell it. The committee estimates that the government could have lost Shs 700m through the minister’s arbitrary actions.

NO STAFF

The committee further found that more than 16 entities had critical staff missing, which derailed their performance. Of the entities analysed, the report says, 39.3 per cent (540) of the vacancies were not filled. At the Uganda National Bureau of Standards, for instance, of the 457 approved staff structure, 223 slots remain vacant.   

At Uganda Bureau of Statistics, 75 places are not filled; 55 are unfilled at National Planning Authority, 42 at UCDA, and 38 at PPDA; 27 at UIA and 22 at Uganda Wildlife Training Institute. Yet on top of understaffing, there are huge salary disparities across the board.

“Officers in some entities are paid half or a quarter of the salary of their colleagues elsewhere to perform similar or same functions,” the report says.

“The committee does not understand whether remuneration is determined by the size of the budget, negotiating skills of the staff, benevolence of board/minister or industry practice.”

MISSING FUNDS

The committee found that in the period reviewed, Shs 1.1bn spent by eleven entities remained unaccounted for. The funds were advances to individuals, fuel expenses, and utility bills lacking supporting documents.

For instance, Dairy Development Authority (DDA) failed to account for Shs 405.5m in procurements and an additional Shs 25m in advances to staff. UIA could not account for fuel expenditure worth Shs 191.5m and workshop expenses to the tune of Shs 91.9m.

The Uganda National Cultural Centre (UNCC) could not explain unaccounted-for advances to the tune of Shs 140.9m. Management Training and Advisory Center (MTAC) has a doubtful expenditure of Shs 19.3m and Shs 33m in fuel expenses. 

National Planning Authority (NPA) failed to account for Shs 29m. Insurance Regulatory Authority couldn’t explain Shs 40m in fuel expenditure. Rural Communication Development Fund spent Shs 52m on trainings ICT but lacked support documents; NAGRC&DB in Entebbe couldn’t explain the loss of Shs 8m, Nakivubo War Memorial stadium Shs 19.5m, and Uganda National Council for Science & Technology (UNCST) Shs 20.4m.

UNCOLLECTED DEBTS

The report also shows that as many as 10 government entities had failed to collect money from debtors. Some 67 per cent (Shs 136bn) of the money is owed to Bank of Uganda.

Civil Aviation Authority (CAA) can’t collect Shs 48bn so far, National Medical Stores Shs 12bn, UBC Shs 3.3bn, and NSSF Shs 1.1bn. Others that have failed to collect debts between Shs 15m and Shs 400m are: Allied Health Professionals Council, Nakivubo Stadium, Uganda Development Bank, DDA, and NEMA.

UNREMITTED MONEY

As many as seven entities did not remit statutory deductions relating to PAYE, withholding tax, and NSSF contributions. Shs 5.3bn in taxes was not remitted in 2013 as well as Shs 1.2bn in workers’ savings to NSSF.

Entities with outstanding amounts for taxes are Nakivubo War Memorial Stadium (Shs 805m), Uganda Post Ltd (Shs 3.1bn in 2012) and (Shs 83 in 2013), UNCC (Shs 110m), and UNBS (Shs 1.8bn).

NO DIVIDENDS

Several entities have failed to pay government outstanding dividends to the tune of Shs 4bn. As at 2011, National Housing owed government Shs 2.3bn, Uganda Property Holdings Ltd Shs 200m in 2010, and Shs 300m in 2013. New Vision is yet to pay Shs 1.2bn in dividends to the government.

The New Vision management told the committee that the dividends had been “swapped with outstanding debts accruing from various government entities with permission from ministry of Finance.”

The committee said this was irregular as the funds ought to have been remitted to the consolidated fund before expenditure was allowed.
“It is only parliament through the Appropriation Act that can authorize expenditure of government revenues,” the committee said in its report.

  • 27 have no boards of directors
  • 16 have critical staff missing
  • 10 have failed to collect debts
  • 09 have no land titles for their headquarters
  • 07 did not remit PAYE and NSSF


amwesigwa@observer.ug

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